Gloomy on economy, FedEx eyes more cuts

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FedEx Corp. is not expecting a boost in economic activity anytime soon, so the world's second-largest package delivery company announced plans Wednesday to boost profits by shedding jobs, aircraft and underused assets. The cuts will come primarily in the Express and Services units, which have been hurt the most by global economic conditions.

FedEx said the moves will add $1.7 billion to the bottom line within three years. The company had announced a voluntary buyout program in August.

Investors responded by driving up the price of FedEx shares 5 percent, or $4.41 to $89.99.

David Bronczek, president of FedEx Express, said Wednesday during a teleconference with investors and analysts in Memphis, Tenn., that the company had hoped for a stronger recovery from the 2008 global recession and that would return it to the "same trajectory we were on," but that never happened.

Late Tuesday, the company announced David F. Rebholz, president of the Moon-based FedEx Ground unit, will retire effective May 31. Mr. Rebholz, has led the division since 2007 and spent 37 years with the company. A successor will be named later, the company said.

FedEx Ground has continued to gain market share for the last 51 quarters even during the Great Recession and the weak economic recovery. Mr. Rebholz said the division was able to grow because "our ground business is better."

Mr. Rebholz, who said the division holds 30 percent of the market, added later during the question and answer part of the meeting that he thought FedEx Ground could add another 20 to 30 percent.

Henry J. Maier, vice president for strategic planning, said in the last five years the volume of packages handled by the ground unit has grown by 50 percent.

Drivers who deliver the company's packages do not work for FedEx, but instead for the small businesses that contract with FedEx. Mr. Maier said the company is continuing to move to contractors with multiple routes and away from those who just have one. Currently 82 percent of the packages delivered are through contractors who own multiple routes, he said.